Stubborn CPI rise challenges Australia’s economic outlook, REIA reports
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According to the latest ABS data, the Consumer Price Index (CPI) increased by 4.0% in the twelve months to May 2024, a noticeable uptick from 3.6% in April and 3.5% in March. Real Estate Institute of Australia President, Ms. Leanne Pilkington, commented on the data, noting that while the rise is disappointing, the monthly CPI indicator does not cover the entire consumer price index basket, accounting for only 62% to 73% of it.
Ms. Pilkington emphasized the importance of the upcoming June quarter figure, which will provide a more comprehensive basis for the Reserve Bank of Australia’s decision-making in its August board meeting. “This stickiness in the final hurdle to beat inflation mirrors challenges other countries are facing in bringing inflation within central bank targets,” she added.
Significant price increases were noted across several categories with housing costs rising by 5.2%, food and non-alcoholic beverages by 3.3%, alcohol and tobacco by 6.7%, and transport costs by 4.9%. On a positive note, rent increases showed a modest deceleration, with a 7.4% rise in the twelve months to May, slightly down from previous months.
Ms. Pilkington also highlighted broader economic challenges, pointing out the subdued economic growth and a slight increase in the trend unemployment rate from 3.9% to 4%, the highest since the COVID lockdowns. “GDP growth was only 0.1% for the March quarter and 1.1% for the year, trending downwards. Per capita, we have experienced four consecutive quarters of negative growth,” she explained.
The current inflation uptick, according to Ms. Pilkington, should not necessarily trigger an increase in interest rates but may delay any potential cuts. She also cautioned that the cumulative impact of Federal and state budgets and their ‘cost of living measures’ might paradoxically drive consumer demand and, subsequently, inflation, potentially leading to higher mortgage costs over a prolonged period.